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Why Is Incyte (INCY) Up 1.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Incyte (INCY - Free Report) . Shares have added about 1.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Incyte due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Incyte Misses on Q3 Earnings & Revenues

Incyte reported disappointing results for the third quarter of 2018, wherein both earnings and revenues missed expectations. The company reported a net income of 38 cents per share, which missed the Zacks Consensus Estimate of 40 cents but was up from 19 cents reported in the year-ago quarter.

Quarterly revenues were $449.7 million, up 17.9% year over year. Excluding milestone payments, revenues came in at $429.7 million, which missed the Zacks Consensus Estimate of $443.0 million.

Quarter in Detail

Total product-related revenues came in at $367.7 million, up 14.2% from the year-ago quarter. Of these, Jakafi’s revenues came in at $347.6 million, up 14% from the year-ago quarter, driven by strong patient demand. Net product revenues of Iclusig amounted to $20.1 million, up from $18.1 million in the year-ago quarter.

Product royalty revenues from Novartis AG for the commercialization of Jakafi in ex-U.S. markets grew 23% to $50.9 million. Olumiant’s product royalty revenues came in at $11 million.

R&D expenses were $251 million, up from $234 million in the year-ago quarter. SG&A expenses amounted to $85 million, up from $80 million in the prior-year quarter.

2018 Outlook Updated

The company expects Jakafi revenues of $1,370-$1,400 million (previous guidance: $1,350-$1,400 million). Iclusig revenues are expected to be $80-$85 million.

R&D expenses are now expected to be $993-$1,038 million, down from $1,008-$1,103 million projected earlier. SG&A expenses are expected to be $370-$385 million compared with the previous guidance of $340-$355 million.

Pipeline Update

Incyte’s supplemental New Drug Application (sNDA), seeking a label expansion of Jakafi for the treatment of steroid-refractory acute GVHD, has been accepted for Priority Review by the FDA. The agency has set a target action date of Feb 24, 2019. The application for approval was based on the successful REACH1 trial, additional results from which are expected later in the year.

Meanwhile, the global phase III GRAVITAS-301 trial of itacitinib as a treatment for patients with newly-diagnosed acute GVHD is enrolling. Results from the study are expected in 2019. Assuming the trial is successful, Incyte expects to submit applications seeking marketing approval for itacitinib in major markets globally.

Data from the phase II trial on the cream formulation of Jakafi in adult patients with atopic dermatitis were encouraging. Hence, Incyte is planning to initiate a global, pivotal phase III trial for this indication. Data from the randomized phase II trial of Jakafi cream in patients with vitiligo are expected in 2019.

The trial evaluating pemigatinib (formerly INCB54828) show promising efficacy in advanced cholangiocarcinoma patients with FGFR2 translocations. Incyte expects to submit an NDA for pemigatinib as a treatment for patients with advanced cholangiocarcinoma in 2019. The company expects to start a phase III trial for the first-line treatment of patients with cholangiocarcinoma in the coming months. Enrollment in the continuous dosing cohort of the phase II trial of pemigatinib in patients with bladder cancer is now underway.

In June 2018, Incyte and partner Eli Lilly and Company announced that the FDA has approved the 2 mg dose of Olumiant (baricitinib), a once-daily oral medication for the treatment of adults with moderately-to-severely active rheumatoid arthritis (RA) who have had an inadequate response to one or more tumor necrosis factor (TNF) inhibitor therapies.

Consequently, Incyte obtained a $100-million milestone payment from Eli Lilly. However, the 4 mg dose of the drug was not approved. Lilly recently initiated a phase III trial of Olumiant in patients with systemic lupus erythematosus and a phase II/III adaptive design trial of Olumiant in patients with severe alopecia areata.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Incyte has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision looks promising. Notably, Incyte has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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